By Chris Becker
Its been another mixed day on Asian markets, a bit directionless because of last night’s US holiday, with the ASX200 slipping, down 26 points or 0.6% to 4303 – I’ll take a closer look at the bottom of the post for a full roundup including technical analysis of the bourse itself. The Nikkei 225 had a scratch day, whilst Chinese markets remain volatile as the Hang Seng gives back yesterday’s gains, down 0.3% whilst the Shanghai Composite is off nearly 1%
The Aussie battler (AUD/USD) saw some bids intraday on response to the RBA’s decision to hold (for now) and the current account figures. Its still in a downtrend (depending on your timeframe of course) as it should be, now at 1.0279 whilst the Euro/USD is up slightly as the US Dollar Index continues to falter, now at 81.1 points:
Its long (sic) been my thesis that a fall below 81 points on the DXY would see this “hopium” rally confirmed on risk markets, but I still think markets are setting themselves up for one of the biggest bull traps in a long while. MacroInvestor subscribers will know what I’m talking about and in this week’s edition we’ll talk more about how you can protect and exploit this risk/opportunity….
Meanwhile, in gold (USD) is still consolidating after its big breakout last Friday, currently at $1693USD an ounce, but in AUD terms the story remains one of strength, for now, just under $1647AUD per ounce and approaching resistance overhead…all it needs now is a Pascometer article saying gold is useless…
Australian Stocks
With earnings season mostly over, the boffins (including this one) are working out what the heck just happened and where we are going from here. As a rule, the industry is always bullish, just in different shades of BRIGHTNESS. I think the rule at the moment is – don’t invest in ASX100 stocks unless they have overseas exposure (and will take advantage of lower AUD), and look at the small cap and microcap industrials. The ASX200 index is for trading, not investing… The biggest movers in the ASX8 (the top four miners and bankers) were the Megabank divisions, with ANZ and WBC looking like rolling over from their highs. The miners finally had some respite, except Fortescue (FMG) which continues to fall and is approaching support at $3.40 – would you buy here? (NB: MacroInvestor, and myself personally are short FMG, entering on the break below $4 and with stop loss at break even…but a break of support here would mean piling in even more)
With the index, it needs a signfiicant catalyst to bounce back above significant resistance at the 4400 point level, probably of a European flavour, but I still think this is too over extended and needs to retrace further for sustainability. There’s tentative support at the 4300 point level, but I’d have my stops tight:
These daily updates need to be placed in context with the longer trends and drivers amidst the overall technical picture, where Former “Trading Week” readers will find it reborn as “Technicals“, published 8.30am each Monday morning.
Chris Becker is an investment strategist at Macro Investor, Australia’s leading independent investment newsletter covering stocks, trades, property and fixed interest. Each week Macro Investor publishes tables on the top ten most undervalued and overvalued stocks on the ASX. A free 21-day trial is available at the site.
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